New construction starts in September retreated 7 percent to a seasonally adjusted annual rate of $405.2 billion, according to an Oct. 18 report by McGraw-Hill Construction.

Nonbuilding construction, which is comprised of public works and electric utilities, pulled back following strong activity reported over the summer. Meanwhile, both nonresidential building and housing showed some improvement in September after their loss of momentum in the preceding month. For the January-September period of 2010, total construction came in at $314.6 billion, down 3 percent from the same period a year ago.

“The monthly pattern shows that construction starts have essentially stabilized at a low level, but have not yet reached the point where renewed expansion is taking hold,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “For various reasons, a sustained upturn for overall construction activity remains several quarters away.”

He said the lift that had been provided to the public works sector from the stimulus funding is now subsiding. Murray added: “vacancy rates for commercial properties remain high, and will be slow to recede given the weak employment picture. The tough fiscal climate for states and localities is making it more difficult for institutional projects to go ahead. And, the freeze on home foreclosures may well extend the time needed to correct the imbalances in the housing sector.”

One nugget of good news came from the Architecture Billings Index, which reported on Oct. 20 that a growth in design activity in September was the fourth straight month of higher activity. The new projects index was also up sharply.

“This is certainly encouraging news, but we will need to see consistent improvement over the next few months in order to feel comfortable about the state of the design and construction industry,” said American Institute of Architects Chief Economist Kermit Baker. “While there has been increasing demand for design services, it is happening at a slow rate and there continue to be other obstacles that are preventing a more accelerated recovery. Still, the strong upturn in design activity in the commercial and industrial sector certainly suggests that this upturn can possibly be sustained.”

The 3 percent decline for total construction during the first nine months of 2010 was the result of varied behavior by major sector. Nonresidential building fell 11 percent  year-to-date. Commercial building was down 20 percent; manufacturing building down 16 percent, and institutional building dropped 7 percent. Non-building construction in the first nine months of 2010 slipped 3 percent.

Geographically, total construction during the first nine months of 2010 revealed an increase for one region – the Northeast was up 7 percent. Total construction in the Midwest held steady with a year ago, while total construction declines were reported for the South Central, down 3 percent; the West, down 6 percent, and the South Atlantic, down 10 percent.